Bitcoin holders in danger: BTC costs higher than BTC price now, says Top Analytics firm
Bitcoin has plunged over 3% to trade below $18,500. At the same time, total mining computing power has reached an all-time high, lifting the cost of mining to $19,300. Calculating, the cost of mining Bitcoin is now higher than the current price, prompting more miners to sell BTC and further increasing selling pressure for the royal crypt.
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Bitcoin has behaved like tech stocks since the early days of the pandemic, although volatility was greater than the tech-heavy Nasdaq. After reaching a peak of $69,000 in November 2021, Bitcoin has fallen over 51% so far this year. Nasdaq’s action was similar. It peaked at 16,212 in November, according to MarketSmith, and has fallen more than 30%.
In September, however, volatility in the stock market was higher than in Bitcoin. While the Nasdaq lost 10.5% last month alone, Bitcoin has been trading within a narrow range. TThe price in recent weeks has moved sideways between $19,000 and $20,000, but fell just below $18,500.
The low volatility in recent weeks is reflected in the Bitmex Bitcoin Volatility Index, or BVOL, a time-weighted average price index based on 30-day annual volatility for Bitcoin. The price is measured in 1-minute intervals for half an hour. BVOL is now below 25, down from above 80 in July.
The tight range signals that Bitcoin may consolidate before the next big move. It also trades around a key level because the coin has often found support around $20,000. In July, the coin rallied after reaching $20,108 as the stock market and Nasdaq surged in the late summer rally into August.
Low volatility leads to big moves
In the past, BVOL has fallen below 25 just before a big move in either direction.
On July 13, 2020, BVOL hit a low of 21.17 and a bull run to Bitcoin’s all time high of $67,549.74 ensued.
But earlier, when BVOL fell to 16.75 on November 5, 2018, it extended a year-long decline. The coin nearly halved its value to trade at $3,244 in just over a month. During the year, there was a dive from $15,270 in January 2018. It was a drop of over 70% during the 2018 bear market.
Volatility is a measure of how much the price changes from a moving average. Bitcoin tends to make a big move on financial news. Last month’s consumer price index, which showed inflation still high at 8.3% in August, saw the king crypto plunge 7% in a single day.
The macro conditions are ripe for a striker this time as well. The CPI report on Thursday came in at 8.2% with prices increasing 0.4% as inflation remains high.
Volatility in Bitcoin is also likely to return due to the currency markets. The British pound fell to near parity with the US dollar in September, leading to a 1,150% increase in Bitcoin trading volume in the UK in the last week of September.
So which direction for Bitcoin?
Bitcoin has fallen below $18,500 after this week’s CPI numbers.
Bitcoin has also moved along with the stock market. That means if a rally happens, it will also depend on where stocks are headed.
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